Anyone who tells you that making a profit plays no role in their coin buying habits is most likely not being honest. While there are many motivations for buying coins, most people want their coins to appreciate in value.

But the degree to which making a profit is important varies a lot depending on whether one is more of a collector or more of an investor. And there is certainly nothing wrong with buying coins for profit, if you know what you are doing and recognize that you will lose money on some coins.

If coming out ahead when you sell is important, then you need to do your homework. That means deciding which coins you think have the best potential and learning as much as you can about them, finding honest and reliable dealers to buy from and sell to, and figuring out the best way to sell or market your coins when you decide to sell.

In my view, the more successful coin investors follow an approach that in many ways parallels that of successful stock investors.

If you think you can make a quick buck with coins and without spending a lot of time studying what you are buying, think again. It is a lot harder than most people realize to make a decent profit with coins, especially given the high tax rate on collectibles and bullion. The key ingredients are to buy for the long term, and to carefully build a diversified portfolio so that at least some of your coins are likely to be doing well whatever the overall market is at a given time.

Specialization is certainly a critical component to successful collecting, and it has its role to play even if you are more of an investor. But if you are working with a relatively modest budget, I think it is advisable not to put all your eggs in one basket. But I also am not suggesting that one just hoard coins.

A long-term time horizon is important, but one needs to be aware of coin market cycles. Some coins continue to appreciate over time, but most series and types of coin ebb and flow depending on what is in demand.

There are basically three ways to make money with coins. The best way for those who can afford it, and few can, is to work with an expert dealer and acquire high-end rarities, hold them for a period of time, and then seek out a top-notch coin auction company that will market your coins when you want to sell.

The second way is to buy bullion-related coins when metal prices seem cheap and wait for melt values to increase enough to net you a nice return. Even at today’s relatively high gold price of almost $1600 per ounce, if you are patient, there is a strong chance you will do well if you can wait at least a few years, or preferably longer. Silver seems cheap under $30 to most people, so now is probably a good time to stack some silver if you are not in a hurry to sell.

It may help to include some bullion as part of your retirement planning. A recent study by the World Gold Council found that allocating between 2.6 and 9.5 % of your portfolio to gold increased long-term financial performance.

A third approach, and this one is especially tricky if not done right, is to carefully buy the best-quality collector coins you can afford and wait for the right market cycle to sell them.

This could include classic type coins, pre-1933 gold, low-mintage modern coins, world coins, and so forth.

But many collectors are not aware of how many pitfalls there are to investing in collector coins, and it is advisable to acquire these kind of coins as much for the enjoyment as the potential profit. In many cases, dealer margins will eliminate most or all of your profit, and the same is true of e-Bay fees, especially if you sell too soon.

Older American coins are a lot of fun, and there are still some reasonably priced coins with strong potential such as graded better-date Morgan dollars that don’t cost a fortune. Examples include 1878-CC, which is always a favorite with collectors, other less common Carson City dates like 1885-CC, 1879-S with reverse of 1878, 1883-S, 1884-S, 1886-S, 1889-S, etc.

Good quality Bust and Seated Liberty coinage is also in strong demand, but I would stick with professionally graded coins. There is not a lot of original material of this kind in the market that is still ungraded, and when you try to sell a raw coin, you will likely have problems. People who own raw coins like these and send them in for grading frequently receive them back ungraded because the coins had been cleaned or their surfaces were altered in some way.

Try the better auction houses like Teletrade and Great Collections and you should find some nice graded coins, but quality pieces will bring strong prices, and what may seem like a bargain on e-Bay, for example, is a coin you may later regret owning.

That is especially true of pre-1933 gold. There is so much cleaned, overgraded, and even items of questionable authenticity that even for more common material, I would stick with graded coins. Over the years I have encountered these kind of problems with raw gold coins purchased from some of the largest dealers with decades of experience, and at this point I would not buy raw gold (except bullion or items from the U.S. Mint) from anyone. It is just not worth the hassle. Even experienced dealers can be fooled by a good fake or a doctored coin.

The recent price performance of many of the classic segments of the market has not been terribly strong with the exception of major rarities and properly graded, better type coins and silver dollars, which are always in strong demand, and a few other series. Overall, this is probably a better time to buy than to sell classic coins, especially many key dates, which have been stagnant in recent years.

Then there is modern U.S. Mint material which has a very mixed track record. A lot of coins from commemoratives to mint and proof sets sell for less now than they did when issued, and I do not expect that trend to change. However, there have certainly been some winners like key-date commemoratives and very low mintage American eagles. To invest in these coins and pick the likely winners requires a lot of careful study of mintage data and market trends so you know what is likely to be in demand.

To be sure, most precious metal modern Mint coins are worth more now than when issued, but that is usually because of higher metal prices.

There are also plenty of modern coins that are most likely undervalued in today’s market such as the 1996 Olympic silver dollars, which are the lowest mintage commemorative silver dollars ever issued. But remember that no mater how undervalued a coin may seem to be, it is hard to say how long it will take for that coin to reach its potential. And coin market cycles can be as frustrating as the stock market has been in recent years.

Information is critical, so put together a good numismatic library, read the best coin publications and web sites, and learn the differences between the retail and wholesale side of the market. And while investing for the long-term is highly advisable, I would suggest periodically selling coins you don’t need to help you develop the skills needed to be successful at selling.

The bottom line is know what you are buying, take your time when selecting coins, know who you are buying from, and carefully build a diversified collection that has some coherence to it. Also keep good records and keep your receipts, which will be needed for tax purposes and for your heirs.

Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.

Louis Golino is a numismatic journalist and writer specializing in modern coin issues. He has been writing a weekly column for Coin Week since May 2011 called "The Coin Analyst," which focuses primarily on modern U.S. and world coins and developments at major world mints, and is also a contributor to two magazines, American Hard Assets and the Numismatist, the American Numismatic Association's monthly publication. His work has also appeared in Coin World, Numismatic News, and various coin web sites. He collects classic and modern U.S. coins and modern world coins from a number of different countries. He first joined the ANA in the 1970's. He has also worked for the Congressional Research Service of the Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of publications. He has been writing professionally since the early 1980's.

Your comments are insightful, as always. My early experience was in the 1960’s, when there were three grades of coins, circ, uncirc, and proof. Imagine my shock to come back into the hobby and find not only all of the Sheldon grades, plus at least three separate categories within each Sheldon grade.

My early collecting was out of pocket change. Of course, unless you like clad coins, anything worth collecting now will be at substantial premium. While I was formerly skeptical about grading services, I tend to fall in line with your thinking now, that anything of any value should be graded. I’ll even go beyond that and say if you are paying for the grade, it should have a CAC sticker on it as well.

The problem of coin counterfeiting is scary. Not only are some of the fake coins now as good or better than the originals, but the slabs and stickers are being faked and manipulated. Other than to continue to acquire some common new stuff obtained directly from the various mints if I like it well enough, I plan to heed your advice in the future as to investment coins.

Bos, Thanks for your comments and for sharing your experiences. I hope you find my recommendations useful. It’s a great hobby and investment with lots of potential, but one really needs to tread carefully.

Your advice is “spot on.” (you can never truly eradicate bad puns). I read a lot of coin books, do research and try to buy what I believe to be coins that will appreciate, although through trial and error have made some mistakes, well sometimes more than one. My problem is I fall in love with my coins. How do you overcome this when it is time to sell a coin that no longer fits into your collection or investment.

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